Many people find building a property investment portfolio an effective way to create wealth. And when you understand the process, investing in real estate can assist you to reap long-term rewards.
In order to succeed, it is integral that Investors are fully aware of the opportunities and the possible pitfalls that come with property and financial growth.
If you are a novice Investor looking to get started with property investing, here are few tips.
Tip 1 – Your decisions should be strategic, not emotional
You should approach your Investment Strategy with your head not your heart. So, when looking to buy investment properties, being clear about what you would like to achieve is essential. In order to remain strategic, there are three key points should keep in mind:
- Understand your weekly cash contribution, and ensure that you it fits with your affordability and lifestyle,
- Be prepared for future increases in interest rates and periods where you may not have a tenant. This means having sufficient buffers in place, and
- Take advice from experienced people who are investing themselves and can guide you through the process. This helps to take the emotion out of the process.
Tip 2 – Be wary of the quick bargain
Take caution when someone advises you to buy a ‘bargain’ property that you can re-sell expeditiously and make a quick profit. Building your portfolio should not be left to chance. If it seems too good to be true, then it probably is.
Investors should look at Investing as a long-term proposition and not a get rich quick scheme. This involves careful planning and ensuring you are prepared for the ups and downs that can happen with short term shifts in the market.
Tip 3 – Know where to invest
When choosing an investment location you must consider areas where your future tenant will want to live. Finding the best locations and markets to invest into, requires dedicated research. This should factor in not only where the market sits here and now, but also how it will look in the future.
As Perth advances, so do new opportunities and growth areas. Understanding future growth by accessing current information from experts working in the field is highly desirable. Be looking at these with the tenant in mind:
- Is it a desirable location where people want to live?
- Does the property offer attractive features which appeal to a tenant?
- Is there easy access to transport?
- Are all the necessary facilities and amenities nearby?
Tip 4 – Know what to buy – Building NEW v’s Buying established
There are pros’ and cons for each so weighing up the options requires detailed analysis prior to making your decision to ensure it fits in with your end goals.
One such example are the differences in Stamp Duty payable at settlement. When buying an established property, stamp duty is payable on both the land and established house. For a $450,000 purchase price, this would be an additional $15,390 in stamp duty. (Source: Stamp Duty Calculator). This would also be the case if you were purchasing a property to renovate.
Building a NEW investment
When building a new property Stamp duty is only payable on the value of the vacant land which is a big upfront savings. This is just one of the benefits of buying new over established.
A new property enables you to maximise the depreciation claimable through your tax, which alongside the minimal maintenance required on a new property, means that the cost of having the property is significantly reduced. This can make a big difference to your overall picture when setting out to build a property portfolio. Hence why a feasibility analysis is such an important component of the process prior to any decisions being made.
Tip 5 – Get started sooner, rather than later.
Trying to pick the top or the bottom of the market is a fruitless exercise that many people get caught up in.
There are different dynamics in play regardless of whether you are buying in a ‘boom’ market or a ‘slow’ market, so revealing the financial implications of these enables you to make informed strategic decisions.
One of the key factors for property investing is being able to sleep comfortably at night despite what is happening in the market. Understanding that you’re buying your investment property for long-term returns and not short term profit takes the pressure off, particularly when you have done the important exercise of setting your financial goals and strategy up first.
And, regardless of what is happening in the market, getting started sooner rather than later has consistently shown to be profitable when using a long term view.
Beginners often get tripped up because they let their heart drive the decision. This is often characterised by buying poorly at the height of the market out of fear for missing the horse that’s bolted, or, paralysed by fear during the quieter times and missing the plethora of buying opportunities which are available right now
Tip 6 – Seek advice from a specialist property consultant
Many people don’t realise just how easy and affordable holding investment properties can be when implemented in a strategic way. Meeting with a specialist property consultant and analysing the costs involved, the rental income from tenants and the associated tax benefits enables many prospective investors to embark upon a very affordable and rewarding reality.
With systems such as Ventura iD’s, Direct Investment Solutions, specialist advisors can determine an individual’s affordability based upon their unique situation and financial goals.
Ventura iD and Multi Living Developments offer a free consultation service so you can see if developing is an option for you. Call (08) 9241 1600.